Thursday, April 09, 2009

"Direct Government Subsidies" as the "Conservative" Solution to Health Care

When it comes to health care reform, Ramesh Ponnuru is far from the first voice that comes to mind. Nonetheless, for reasons I can't quite fathom, he's in the Post today trotting out a series of tired lines about health care reform. He opens by confusing the means with the ends:
But the goal should not be universal coverage. Reform should simply aim to make health insurance more affordable and portable.
Universality is one of the means by which health insurance can be made affordable, and even insurance companies recognize its importance.To state the obvious, not every health care reform proposal embraces universality. Obama's does not. So I'm left wondering, is Ponnuru presenting that statement as a red herring, or is he trying to create a false dichotomy?

Ponnuru attempts a sleight of hand:
The practical case is that uninsured people raise premiums for everyone else. But such cost shifting raises premiums by 1.7 percent at most, according to a 2008 study published in the journal Health Affairs. Reforms that increase the number of people with health insurance, while stopping short of universal coverage, would presumably make that small percentage even smaller.
As the aforementioned insurance companies have made plain, the issue is not "how much uninsured directly raise the costs for everybody else" under the current system. The issue is, should they be allowed to free ride until they have serious medical needs, then "buy" health insurance at an affordable cost while burdening the entire system with the costs of their care? Further, when we're talking about national health policy, the issue goes well beyond the raising of premiums. Some of those people end up getting care that's not reimbursed - the provider eats the cost. Some of those people end up getting care through government-paid and government-subsidized insurance. While that doesn't raise the cost to private health insurers, it certainly imposes a cost on taxpayers. Some of those people put off care for a condition that becomes chronic or disabling (e.g., inadequate diagnosis and treatment of diabetes or high blood pressure) resulting in their receipt of disability benefits - yet another cost the taxpayer bears, but which is not reflected in health insurance rates. Etcetera.

And then comes the slippery slope:
To mandate that everyone purchase health insurance, as many have suggested, would require that the government specify what constitutes adequate coverage — in other words, what health conditions an insurance policy would need to cover. Every provider group with a lobbyist, from massage therapists to fertility specialists, would want in. The result would be expensive insurance policies and costly government subsidies to help people buy them. Young and healthy people, especially, would be forced to overpay. So we would end up with more cost-shifting, and no savings.
We have various national health care plans in pretty much every industrialized nation, as well as many that aren't so industrialized. We've had experiments meant to try to achieve universal care in a number of states, including an insurance mandate in Massachusetts. We have government insurance provided through Medicare, Medicaid and the V.A. Where, in any of that, can we find evidence supporting Ponnuru's fantastical slippery slope?

From there, Ponnuru gets even more absurd. After suggesting that a health insurance proposal from Ron Wyden "owes more to Rube Goldberg than Milton Friedman", Ponnuru contends:
The moral case for universal coverage is that we have an obligation to see to it that the poor and the near-poor have access to good health care. But universal coverage is only one way of realizing that goal, and not necessarily the best one.
I'm not sure why Ponnuru sees no "moral case" in avoiding a free rider problem. But whatever the "moral case", Ponnuru's response is not persuasive. Democracy is "not necessarily" the best form of government - somebody might even quip that it's the worst form of government "except all those other forms that have been tried from time to time". But if you're going to advocate against something, you should be prepared to make the case that other options are superior. Sure, you can argue that other options are equivalent, but unless you demonstrate the superiority of your idea you're not really contributing to the debate. In suggesting that universal coverage may not be the best alternative, Ponnuru should be explaining what's better - yet beyond speculation that some alternatives may be as effective, Ponnuri treats us only to the chirping of crickets.
For people with pre-existing health problems, for example, direct subsidies would probably be more efficient than rigging insurance markets to make sure they are covered.
Probably? So we're guessing, and aren't arguing superiority? And given the choice between a system where everybody is insured and gets treatment pursuant to the coverage obtained through their policy, and a system where free riders go without insurance until they are about to incur massive health care costs, then apply for government subsidies to pay for their care... Ponnuru believes that the latter approach would "probably" be more efficient? Which approach relies more heavily upon individual responsibility, and avoids free rider problems - issues that should concern conservatives? Which approach is more susceptible to imposing different outcomes in similar cases, requires the greater government bureaucracy to administer, and has the greater potential for fraud? Could it be... the one Ponnuru prefers? Sure could. But I guess, to him, that's an acceptable price given his speculation that it might be more "efficient" than the alternative that relies on moral markets and individual responsibility.
As Michael Cannon, a health policy analyst at the Cato Institute, has written, “There is no evidence that a dollar spent on universal coverage will save more lives than a dollar spent on clinics, or reducing medical errors, or nutrition, or fighting poverty, or even improving education.”
Again we're talking equivalency. That's not an argument that one approach or the other is superior - if both options are the same when it comes to every single desired outcome, and no other argument is made, there's no reason to change horses.
And if universal coverage generally reduces the quality of care or retards medical innovation, it could end up being bad for everyone, including the poor.
And if universal coverage generally increases the quality of care or inspires medical innovation, it could end up being a huge benefit to everyone, including the rich! Wow, this game is easy.
An alternative approach would be to make it easier for people to buy insurance that isn’t tied to their employment. The existing tax break for employer-provided insurance could be replaced with a tax credit that applies to insurance purchased either inside or outside the workplace. At the same time, state mandates that require insurers to cover certain conditions, which make it expensive to offer individual policies, could be removed.
Leaving the merits of this proposal (really the lack of merit) aside for the moment, did you catch that? A moment ago Ponnuru was telling us how horrible it would be if the government specified what health conditions an insurance policy would need to cover - with us riding down a slippery slope to the point that our massages, maybe even our pedicures, would be covered by insurance. Now that's just fine, as long as there's a theoretical future date when the mandate might no longer be needed. Ponnuru doesn't explain when or how the mandates could be removed, suggesting that he in fact cares much less about mandates than about avoiding universal comprehensive coverage.

But that much should be obvious from the fact that he's advocating a health insurance proposal that is unadulterated garbage. (Or maybe it's adulterated garbage? I probably should use fewer adjectives.) Anybody who knows anything about health insurance knows the cost advantages of group plans, including the fact that larger employers are often able to enroll employees in health care without regard to pre-existing conditions. Do some comparison shopping between group plans and individual plans, even from the same carrier. If you have good insurance, you'll likely find that the best available individual plan costs more and offers less.

If you look at a comparably priced plan, you'll likely find that for the same money you get a fraction of the coverage you obtained through your group plan. That, I suppose, is why Ponnuru sees the need for the government to step in and tell insurers "You must provide a reasonable amount of coverage" - otherwise you'll get a revolution the moment you try to force employees out of their satisfactory employer-sponsored plans into inferior individual plans. But he admits up front that it's a bait-and-switch - once we reach the point of no return, the mandate goes away and the bottom falls out, but there won't be any going back to employer-sponsored plans.

Really, that appears to be his "solution". Wow....
Insurance would be more affordable, especially for people who cannot get it through an employer, so the number of people with insurance would rise.
Why would insurance become cheaper? As we've previously discussed, you can get better coverage for less money through an employer-sponsored group plan than through an individual plan. Unless Ponnuru's proposing subsidies, individual plans will be less comprehensive and more costly. With his proposed mandatory minimum benefits package, it's hard to imagine why he doesn't think that costs of private policies will rise - he thinks insurance companies will offer more for less?

Sure, as Ponnuru suggests, if you offer tax credits exclusively for purchasing insurance, you may be able to get uninsured people - those whose jobs don't offer insurance or who are self-employed - to buy insurance using the tax credit. But that doesn't make the approach better than the alternatives, and in no way ensures that the coverage people will obtain under this plan will be adequate.
More important, people would own their insurance policies and thus be able to take them from job to job. They would no longer need to worry about losing their job and their insurance at the same time, or feel they need to stay with a job they dislike because they need the benefits.
That could be true in a system involving health care mandates. It could be true in any universal system. It certainly would be true in single payer. And if you think about it, if the goal is to keep coverage no matter what you do or where you live, Ponnuru's plan may actually be the weakest of the bunch while a single-payer government plan becomes the strongest. Private health insurance companies may not serve another state, so if you move you could have to swich carriers. Private health insurance companies may have limited networks of participating doctors and hospitals, so even an in-state move may necessitate a switch. But a "Medicare for all" plan would ensure coverage with every participating hospital, clinic and physician, nationwide. Which side of this debate is Ponnuru on, again?

As if to add an extra dose of comedy, Ponnuru provides his remedy for those who aren't able to continue coverage under their private plan, but aren't eligible for a new plan due to their pre-existing conditions: "Direct government subsidies". Isn't Ponnuru supposed to be pitching this as a plan that exploits the superiority of the markets?

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